The number of millionaires in the U.S. increased by 500,000 last year

The U.S. far outpaced the rest of the world in minting millionaires last year, adding 500,000 new millionaires and powering record fortunes at the top, according to a new study.

America’s millionaire population grew 7.3% in 2023 to 7.43 million people, according to a report from Capgemini. Their combined fortunes grew to $26.1 trillion, up 7% from 2022. Capgemini defines millionaires as those with investible assets of $1 million or more not including primary residence, collectibles or consumer durables.

While interest rates remain higher, the stock rebound at the end of 2023 combined with trillions of dollars in government spending and stimulus continues to power the U.S. wealth machine.

The fortunes at the very top of the wealth ladder are growing fastest. The number of Americans worth $30 million or more grew 7.5% in 2023, to 90,700, while their fortunes surged to $7.4 trillion.

Globally, ultra-high net worth individuals account for 1% of the millionaire population but now hold 34% of its total wealth, showing the increasing concentration of wealth even among the wealthy.

The big question is whether the wealth boom of the past decade, initially fueled by low interest rates and liquidity, and more recently by Covid-19 pandemic stimulus and artificial intelligence, can continue. Global conflicts, elections, interest rates and a potential economic slowdown could all slow the pace of wealth creation, said Elias Ghanem, global head of the Capgemini Research Institute for Financial Services.

“The last 10 years were exceptional,” Ghanem said. “We now have inflation, a potential recession and geopolitical problems and elections. The environment is completely different.”

Indeed, globally, the wealth picture looks more mixed than in the U.S. The number of millionaires worldwide grew 5.1% last year, to 22.8 million, according to the report. Their combined fortunes grew to a record $86.8 trillion.

Next to North America, Asia-Pacific had the strongest millionaire growth, at 4.8%, followed by Europe with 4%, Latin America at 2.7%, the Middle East at 2.1%, and Africa down 0.1%.

Ghanem said that while Asia surpassed North America’s millionaire population and growth in the years before the Covid-19 pandemic, the U.S. is dominant once again. 

When it comes to their investments, the wealthy are shifting their money from safe, wealth preservation to more aggressive growth assets, according to the report. Their cash and cash-equivalent holdings have come down from a high of 34% of their portfolios at the beginning of 2023 to 25% in January, meaning they are starting to put their cash to work.

Their fixed income holdings jumped from 15% to 20%, and their real estate investments increased from 15% to 19%. Their holdings of stocks continue to fall, to 21%, their lowest level in more than 20 years. While the major stock averages have done well this year — with the S&P 500 up 12% so far and the Nasdaq Composite up 14% — wealthy investors are shying away from a market driven largely by a handful of giant tech stocks.

Ghanem said alternatives, especially private equity and private credit, are likely to get the biggest inflows from wealthy investors this year. Two-thirds of millionaires plan to invest more in private equity in 2024, according to the study.

“Everything is cyclical and because private equity has not done well, it’s a good entry point,” he said. “They figure if they enter now, when it’s cheaper, it’s a good long-term play.”

As the wealth and population of the wealthy soars, the battle over managing their fortunes is becoming increasingly fierce. Ghanem said the winners will be those that best serve the ultra-high net worth clients, or those worth $30 million or more. Capgemini said the ultra-wealthy will be the fastest-growing customer base, as well as the most profitable.

They are also the hardest to attract and retain: The ultra-wealthy have an average of seven wealth management relationships, up from three in 2020. More than three-quarters of the ultra-wealthy plan to switch their primary wealth management firm in 2024.

Ghanem said the most important strategy for firms trying to win more business from the ultra-wealthy is to better understand the clients. Companies may know the financials of their clients, but they rarely understand their family dynamics, psychological risk profiles, investment biases, lifestyles, or geographic diversification, he said. 

Since ultra-wealthy clients are choosing wealth management firms increasingly on value-added services — such as succession and next-generation planning, taxes, concierge services, and access to private deals — companies need to do deeper research on their broader financial and family lives.

Ghanem also said wealth management firms face an onslaught from family offices, the private investment arms of rich families. More than half of ultra-wealthy investors plan to set up a…